Home Buyer Savings: What Every Home Buyer Needs to Know

Before you decide to spend hundreds of thousands of dollars on your new dream home, consider this: Having a FAT wallet or bank account, good credit and putting yourself in debt for 30 years IS NOT NECESSARY!

FINANCING YOUR NEW HOME

If considering the purchase of a new home, you'll need to know how you will pay for it. Assuming you don't have hundreds of thousands of dollars burning a hole in your pocket, the usual method of financing is through a bank or other financial lending institution. However, you might first consider some of the loan and other programs offered by such agencies as HUD, the SBA, Fannie Mae, Freddie Mac and FHA.

With so many different loans available, choosing the one that best fits your needs can be a daunting task (one which I will not go into any detail on here). The amount you will end up paying on the loan will greatly depend (in most cases) on your credit, your ability to make the down payment, pay closing costs and of course, your level of income. If you qualify for a loan, you would make monthly payments for up to thirty years, and in general, the majority of each payment for about the first half of your loan will only be applied to the interest charged, with very little being used to pay off the principal of the loan itself. By the time you finish paying off the loan, you will have paid up to 50% more than the original asking price! Another disadvantage of getting a mortgage is that if you miss even one payment over the entire term of the loan, YOU LOSE! You lose every penny you spent to buy the home, any equity or value you added to the home, the home itself, and your credit score goes down. Talk about RISK!

If you do get a loan to purchase real estate, getting the longest term available will help reduce required payment amounts, thereby reducing the risk of defaulting on the loan (by increasing your ability to pay). These savings could then be applied to the principal of your loan, reducing the length of your loan term by as much as 15 years (so long as there is no prepayment clause to prevent doing this), and the amount you pay over time in interest by up to 50% or more!

GETTING THE BEST DEAL

Once you know how you will pay for your new home and how much you are "qualified" (or willing) to spend, you'll want to know where to find available homes to purchase, and the average going rates. Most people tend to find this information through a real estate agency, but some will at least look in their local newspapers first to see if they can get a better deal directly through the seller, because they know that this simple step alone will save them about 10% on the purchase price. As we all know, a real estate agent (or anyone else for that matter) doesn't make a living by doing their work for free; they usually add an additional 10% (average) to the asking price for real estate.

Fortunately, for the last few of years, mortgage rates have been low enough to fuel a buyer's market, and according to Economy.com, "… the nation's housing market will slip like it hasn't slipped since the Great Depression, with home price declines in 2007 approaching 20% in some areas where the word "crash" could replace "soft landing." This is good news for buyers - bad news for sellers. But at the same time, the lower the real estate prices, the higher mortgage rates tend to be, and vise versa. So which boat would you rather be in? Paying higher prices on real estate, or paying higher prices on mortgage rates? Personally, I prefer the latter, because getting a mortgage is not the only way to buy real estate. For example, many sellers will carry the contract themselves, which eliminates the middleman (the bank) and increases your chances of getting the property. But again, all other rules apply, as does the risk involved. So what other options are there?

WORKING YOUR WAY UP

Many people buy cheap fixer-uppers, make improvements, then sell the home at a profit to purchase a better home. It can take several or more times of doing this until eventually, one has the funds to get what they really want. But with the likely near future of falling real estate prices, this may not be the way to go either - UNLESS you buy real estate for much less than the market value via foreclosure properties, tax delinquent properties, tax sales, the GSA, etc.

REPOS AND FORECLOSURES

A foreclosure is a process whereby mortgaged property is sold (or repossessed) to satisfy the debt of a defaulting borrower. Many of these properties have already mostly been paid off, so there is definitely some margin for savings or profit. To find foreclosure listings, look up "Real Estate Loans" or "Banks" in the phone book (of whatever area you're looking to buy), call each lending institution and ask if they have any "real estate owned homes" (homes they've had to repossess due to foreclosure). Be prepared to tell them what kind of home you are interested in, and ask if they could put you on their mailing list so they can send you information regarding foreclosures they may end up with in the future. This way, you will be one of the first to know about any available foreclosures before they advertise them in the local newspaper (the next place to look).

TAX DELINQUENT PROPERTIES

Another way to get a bargain on real estate is to buy tax delinquent properties. Of course, you may not be able to find your "dream home" this way, but again - it's an excellent way to work your way up from the fixer-upper to what you really want. These properties usually sell for much less than market value, to pay unpaid taxes (and sometimes other associated fees). Sometimes the back taxes can be for as little as a few hundred dollars, sometimes more. I once purchased a home for $40 in back taxes, fixed it up then turned around and sold it for $800. (Yes, I could have sold it for more, but I'm not greedy - besides, that's 2000% profit! Like I said, you can start small).

To find tax delinquent properties, you can look up "tax delinquent properties", "tax sales", "tax liens" or something similar in any of the major Search Engines, like Google or Yahoo. I have found many properties this way, but had a very difficult time finding them for my state -- California, Wyoming, Colorado, Arizona, New Mexico, Texas, Illinois and New York seem to be the states having the most delinquent properties. If tax delinquent property listings cannot be found for your state online, then pick up that handy dandy phone book again and go to the government section. Look up "County Tax Collector", "County Tax Assessor", "County Treasurer" or something similar and call each office. Every county has their own way of doing things, so ask them specific questions like, "When homeowners are delinquent in paying their property taxes, how and when do you go about selling these properties?" Then "Are there any tax delinquent properties available now?" and "How and when do you go about advertising these properties?" Then ask if they have a mailing list; if they do, ask them to add you to it. Some of these properties will be free and clear of any tax liens, but others may sell for more, depending on how long they have been delinquent.

Personally, I see no fairness in the fact that a person can lose their home for not being able to pay their property taxes. I mean, the owner obviously already purchased the home and probably put a lot of effort in along the way. Logically, once you own something, it should continue to be yours, you should not have to continue paying for it after you've already paid for it, and no one should have the right to take it away from you for any reason! Unfortunately (for some), this is how it goes, but there are ways to protect yourself from losing your home due to delinquent property taxes. First, it's a good idea to find ways to reduce property taxes. Then, I would suggest checking out the online asset protection book for information on asset protection and the use of trusts. Or, you might consider prepaying your property taxes at the current rate with a homestead exemption. But one thing's for sure - you definitely don't want to lose your property to the county for delinquent taxes!

As we can see, knowledge really is power! So before you start shopping for your new dream home, use due diligence, common sense, don't unnecessarily waste your time and money and if you simply think you can't afford to buy a new home - think again!

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